Beer Market in Flux as Imports Gain Popularity

Major change is underway in Korea's beer market, with imported brands rapidly becoming more popular and the former No. 2 domestic brand recently dethroning its rival. Regulations on brewers have been loosened, which is expected to open the door for new entrants in a market long dominated by Hite Brewery and Oriental Brewery.

Beer imports surged 17 percent last year to 48,713 tons from 41,492 tons in 2009, according to the Korea Customs Service. As the figure in 2005 was just 22,828 tons, the market for foreign brands has more than doubled over the past five years.

The volume of imported beers sold at large discount stores has been increasing even more quickly. At E-Mart stores nationwide, foreign brands increased from 14.2 percent of all beer sales in the first half of 2009 to 21.7 percent in March this year.

"Customers are showing a strong preference for foreign beers," E-Mart said, "Even though they cost two to three times more than domestic brands, their sales growth is far greater."

But foreign brands still make up only a small percentage of the overall market. Local brewers believe that imports garnered a 2 percent market share here last year, although some importers claim the figure has reached 5 percent. It may be closer to 20 percent if pubs and bars are excluded and only sales at retailers are counted.

The growing popularity of imported beer has had a big impact on the competition between the top two domestic brewers. In January, Oriental Brewery's Cass became the bestselling brand in the country, ending the 17-year reign of Hite's namesake brand. The change came as two companies diversified their lineups in a bid to protect their market shares from imported beers.

New regulations are likely to spur further changes. The amended alcohol tax law which took effect in January significantly lowered the barrier for potential newcomers, slashing the bottling capacity requirement for new brewers from 3.7 million 500ml bottles to 200,000.

Meanwhile, the Korea-European Union free trade agreement, which will likely go into effect in July, is expected to boost sales of foreign beers even more. The import duty will gradually be scrapped from the current 30 percent, bringing the price down.